The WSJ on how the new American dream home may be a rental:
Thanks to a rare confluence of factors — mortgages that far exceed
home values and bargain-basement rents — a growing number of families
are concluding that the new American dream home is a rental.
Some are leaving behind their homes and mortgages right away, while
others are simply halting payments until the bank kicks them out.
That’s freeing up cash to use in other ways.
Ms. Richey’s family of five used some of the money to buy season
tickets to Disneyland, and plans to take a Carnival cruise to Mexico in
March. Mr. Fernandez takes his girlfriend out to dinner more
frequently. “We’re saving lots of money,” Ms. Richey says.
The U.S home-ownership rate has charted its biggest decline in more
than two decades, falling to 67.6% as of September from a peak of 69.2%
in 2004. And more renters are on the way: Credit firm Experian and
consulting firm Oliver Wyman forecast that “strategic defaults” by
homeowners who can afford to pay are likely to exceed one million in
2009, more than four times 2007’s level.
….For the 4.8 million U.S. households that data provider LPS Applied
Analytics estimates haven’t paid their mortgages in at least three
months, the added cash flow could amount to about $5 billion a month —
an injection that in the long term could be worth more than the tax
breaks in the Obama administration’s economic-stimulus package.
“It’s a stealth stimulus,” says Christopher Thornberg of Beacon
Economics, a consulting firm specializing in real estate and the
California economy. “The quicker these people shed their debts, the
faster the economy is going to heal and move forward again.”
the stigma of abandoning a mortgage wanes, the Obama administration
could face an uphill battle in its effort to keep people in their homes
by pressuring banks to cut their mortgage payments. Some analysts argue
that’s not always the right approach, particularly if it prevents
people from shedding onerous debts and starting afresh.